Hitting the working poor

At the time of the last budget I pointed out that the Treasury’s own documents showed that most of us are worst off as a result of the decisions made in that budget and previous decisions made by the coalition Government. You can access the Treasury’s own documents here but the key graph for me is this one:

budget impact distribution

The translation between quintiles and average household incomes is complex (see page 22) of the Treasury document Impact on households:distributional analysis to accompany Budget 2014

Note that much of the increased tax for the top quintile is the top rate of tax going up as this didn’t kick in until after the general election. The important point to note is that the gain from increasing the starting rate of tax is dwarfed by the changes in tax credits and benefits. For the third quintile we could be talking about a family with two adults earning £27,000 between them. This is the average and they gain the most from the change in tax threshold but they still lose more from the changes to tax credits, benefits and public service spending (e.g. spending more on childcare after the Tories broke their promises on Sure Start). More importantly, adults’ wages have on average gone down by £1,600 under this government – which would mean our average two working adult family losing a further £3,200 pounds (and ONS now say household incomes are continuing to fall).

The lower down the scale the worse the situation. Remember a majority of those hit by the benefit changes are in work, not out of work. They just aren’t earning enough to make ends meet.

Cameron’s solution? Hit the working poor harder and give a tax break to those on incomes over £40,000. The families that benefit the most from this change in the threshold? Those earning over £50,000 – the top decile. It is clear that Cameron is for the few who are already privileged – we need a government that will stand up for the other 90%.

Politics is about Leadership

The latest British Social Attitudes Survey published today shows 30% of British people say they would describe themselves as “very prejudiced/a little prejudiced against people of other races”.

The first point to make is that this is not the highest in thirty years – in 2011 it was 38%. But coming on top of UKIP’s victory in last week’s European Elections, it is seen as significant – and it is certainly higher than the percentage a the turn of the century (25% in both 2000 and 2001). But what should we do about it?

Personally, I am disappointed to find that so many people admit to prejudice – but not surprised. Nor do I think it would be sensible for the Labour Party to pander to this prejudice in an attempt to gain votes. I think we need to understand the root causes of prejudice and the much larger percentage of the population who are expressing concern about immigration – and tackle those underlying causes.

Those who are most likely to admit to prejudice are the least educated and in the lower-end of the employment market. In short, those who have been struggling most economically. The idea that you cannot get a job (or as well-paid a job as you would like) because someone else came and took it is easy to believe. The truth is more complex. Such people have been displaced in the labour market by foreigners – but mostly because manufacturing has shifted overseas rather than because the foreigners have come here. Our economy simply has far fewer unskilled and semi-skilled jobs than it used to – and those sections of the workforce have therefore been hit hard either by unemployment or by less choice of jobs and lower wages. Labour in government argued that we needed to upskill our workforce and pushed for 50% of our young people to go to university. I don’t think that policy was wrong (although we should have ensured a much stronger connection between what they studied and what jobs they could expect to secure) – but I do think we needed to do far more to plan a positive future for the other 50% than simply hoping that jobs will be freed up for them if the more able are better qualified.

Divisions within society between those who prosper and those who struggle are deep and have got worse. The well-off have got significantly better off, while the bottom half of society has got worse off. Under Blair and Brown action was taken to address these divides, most notably through tax credits which ensured that people were better off in work than staying on benefits and the introduction of the national minimum wage. But the gap grew wider and even with a buoyant economy too many people were “economically inactive” or struggling. Those who were already struggling were hit hardest by the recession. They have been hit again by the changes to benefits (which hit far more people in work than out of work), withdrawal of public services and squeeze on wages as the Government has admitted. The recovery was coming in 2010, then stopped as a result of Government policies. It is now slowly coming but shows every sign of once again helping the better off more than everyone else.

Would ending immigration solve these problems? There is little evidence to support this theory. For a start, there are almost as many people from the UK living elsewhere in the EU as there are EU nationals in the UK, so withdrawing from the EU would lead to two million people arriving on our shores. That would have a massively negative impact on the housing market, public services and the jobs market. We would lose the taxes paid by migrants (who on average pay far more into the public purse than they take out).

Secondly, we need to think about the kind of society we want. The fact that people weren’t allowed to leave Eastern Europe and travel to the West was seen as a huge issue thirty years ago – we revelled in our freedom and wanted the same for them. The common complaint from supporters of UKIP that “people come here who don’t understand our culture and don’t speak our language” is almost funny from a North Wales perspective as most of the people expressing this view are themselves recent migrants from England. Welsh speakers may be less likely to vote for UKIP, but many are even more vocal in expressing concern about their villages being “overwhelmed” at the same time as being concerned that their children “have no choice” but to move away to find work. I am convinced that the objective of “an ever-closer union among the peoples of Europe” is correct – but it isn’t served by more and more decisions being taken out of reach of the people affected by them or by people being forced to leave the communities they want to be part of. The solution is not to end freedom of movement across the EU, but to address the underlying issues of financial security and unemployment across the EU – the very objective set out in the founding 1957 Treaty of Rome in which the participating Governments affirmed “as the essential objective of their efforts the constant improvement of the living and working conditions of their peoples”.

The fact that a third of the UK admits to prejudice is worrying – as is the fact that one in ten of the population voted for UKIP last week. But pandering to that prejudice isn’t showing leadership. Neither is promising a referendum on leaving the EU. I would be in favour of allowing citizens to promote referenda in the same way as British Columbia does – but I don’t see how Labour promoting a referendum on EU membership would help us. It hasn’t helped the Tories and there are many other issues of much greater important to people such as abolishing the bedroom tax. I don’t believe there are many people who want a referendum who don’t want to leave the EU. But there are many people who feel disengaged from politics and this is something we do need to tackle. It is not enough to do the right thing; we need to persuade people and take them with us. Important though they are, I don’t think constitutional issues or ensuring government at local, national and European level is better at public engagement will win the next election. Instead we need to focus on addressing the causes of the financial insecurity and ensure that both membership of the EU and continuing immigration are beneficial to the public. Does Labour now have the policies to do this? I think so. Ed Miliband has been arguing that we need to build our economy based not on a race to the bottom (low wages, low job security, low skills) as the Tories and UKIP believe, but a race to the top (high skills, quality jobs and enforcing minimum standards so that local workers are not undercut by migrants or by overseas competition). I thought Labour’s ten-Point Cost-Of-Living Contract was excellent. The big difference between Government and Opposition is that our policies aren’t actually being implemented. We know that the Tory/Lib Dem approach has made things worse for most people since 2010 – we need to persuade people that our alternative would be better and to vote for us to implement it.

Journalists asking Shadow Cabinet members whether we need to change our policies in light of the UKIP victory need to stop for a minute and ask whether the public were aware of our policies. By and large the answer was no – and journalists need to think about how they help inform the public about all parties’ policies instead of commenting on politics as if it is simply a race where we are observers rather than participants.

It is a salient fact that Labour actually secured the support of more people than ever before in European elections fought under this system:

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A year after 3.7m people voted Labour in the 2004 European election, 9.5m voted Labour in a General Election, securing our victory. The challenge over the next year is clear. Where will we find these voters? Primarily among those who didn’t vote last week. That requires conversations more than leaflets or speeches – people willing to talk to their fellow citizens.

How will you play your part?

Honest Reporting?

Listen to any media report of the elections and you will hear the same story: UKIP have made huge gains at the expense of the mainstream parties. It is the same as the election campaign itself where the only coverage was:

  1. Nigel Farage
  2. People pointing out that Nigel Farage and other UKIP members are mad, bad and/or dangerous
  3. Reports explaining that UKIP have dominated the election campaign
  4. Ed Miliband forgetting someone’s name

The actual results so far tell a different story:

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Using simple mathematical techniques it is pretty obvious that Labour has made the most gains as well as winning the most seats. I know that people voting for common sense policies that will help address the problems ordinary people are suffering isn’t as exciting as large numbers of people voting for a party whose party leader won’t defend their policies as they are so obviously bonkers – but now the voting is over how about some proper commentary?

Get out the Labour vote!

European elections have never been seen as particularly exciting. Even when they were first past the post, the constituencies were vast. Now that they are done on proportional representation we have the whole of Wales as a single constituency. Small wonder most people can’t name any of their MEPs.

But that doesn’t mean they don’t matter. As our single Labour representative, Derek Vaughan has been doing a fantastic job of standing up for Wales. He is the only one of our four MEPs working within the mainstream political groupings that hold sway in the Parliament, able to form common alliances to achieve what matters to the people of Wales – which is economic growth across Europe with targeted support for the poorest regions.

The Conservatives and Liberal Democrats seem hell-bent on persuading people that it is normal to lie in politics and that a manifesto isn’t worth the paper it is written on. This has created a fertile breeding ground for those who offer false hope. The argument over whether UKIP is racist is missing the point. They are unquestionably promoting xenophobia – the intense or irrational dislike or fear of people from other countries. It is xenophobia which has so often led Europe into war in the past. The founding principle of the European Union (or European Economic Community as it was called in the 1957 Treaty of Rome) was to lay the foundations for “an ever-closer union among the peoples of Europe”. The principle that decisions should be “taken as closely as possible to the citizen in accordance with the principle of subsidiarity” was added in the 1992 Maastricht Treaty. “Ever closer union of peoples” doesn’t mean creating a European superstate – it means the opposite of promoting xenophobia. It means persuading people in every country that they have a common interest in peace and prosperity.

Blaming someone else for the lack of jobs and housing is a simple message – but doesn’t help anybody. If we require the two and a half million people from other EU countries to leave the UK, it would actually create a huge problem for us, as there are almost as many UK citizens currently resident in other EU countries. By placing ourselves outside the EU, we would cease to have any influence over its rules and we in Wales would lose the support from the EU structural funds, many multinational companies would relocate away from Wales and we would lose the opportunity to influence the agenda.

When the Tories say they want to renegotiate our membership, they mean removing social protection – what Ed Miliband has referred to as the race to the bottom, where we try and compete by slashing wages and terms and conditions. Tackling financial insecurity requires the opposite – enforcing the national minimum wage and ensuring that employers treat their employees fairly.

Creating jobs and building more affordable homes must be the top priorities for an incoming Labour Government – but it is also what we need to happen across Europe. That is why Derek Vaughan has been fighting not to maximise the EU spend as Plaid Cymru and the Liberal Democrats argue, but to maximise the impact of that spend in terms of getting people into work.

This week’s Welsh opinion poll shows the result of this election is in the balance. Supporters of extremist parties are more likely to vote. What matters is persuading Labour voters to vote as well. The more Labour voters there are, the more Welsh voices there will be in the European Parliament, committed to working positively with other European countries for economic growth and consumer and environmental protection. I will be working to remind people to vote on Thursday - what about you?

making a difference

Labour vote

If you want progressive Welsh voices in the European Parliament you need to vote Labour

One of the frequent lies from UKIP is that laws are imposed on us by “Europe” or “Brussels”. The truth of the matter is that while the Commission proposes new rules, they only come into force if agreed by the European Parliament and the Council of Ministers. So the UK Government has said yes to each and every new law. Changing that Government to a more progressive one, which thinks about how laws will impact on small businesses and hard-working people instead of their friends and funders in big business is important but will need to wait until May 2015.

But choosing our representatives in the European Parliament on 22 May can also make a difference. For the past five years, Derek Vaughan has worked tirelessly for the people of Wales. While the media focused on the size of the European budget (with Labour and Conservatives wanting it smaller and Plaid Cymru and the Liberal Democrats wanting it bigger), Derek Vaughan was working away to ensure that the budget focuses on what really matters: getting people across Europe working again. As part of that process, he also ensured that European Structural funds will continue to benefit Wales.

In contrast UKIP MEPs take the money but fail to turn up – leaving us with empty chairs representing us. The Tories have lost influence by leaving the mainstream right of centre political grouping and allying with the far right. In the Parliament they have fought to block various measures which would help protect consumers.

So how can we ensure that there are more progressive voices representing Wales in the next European Parliament? The latest Welsh poll looks like this (changes from the February Welsh Political Barometer again in brackets)::

Labour: 39% (no change)

Conservative: 18% (+1)

LibDems: 7% (no change)

Plaid Cymru: 11% (-1)

UKIP: 20% (+2)

Others: 6% (-1)

But what does this mean in terms of allocation of seats – and how could voters use this information to maximise progressive representation?

The system for allocating seats is explained here. If people vote as suggested by the poll, seats will be allocated in each round as indicated by the red boxes:

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Labour / LlafurSo we can expect the final seat to be a contest between Labour and the Conservatives. Leanne Wood has put out an appeal to all “European Progressives” and particularly Liberal Democrat voters to support Plaid Cymru in the election to prevent the victory of “Europhobes”. But the truth is that if she genuinely wants to defeat the Europhobes, she should be encouraging all progressives to vote for Welsh Labour.

 

Does the Prime Minister tell lies on purpose or by accident?

Yesterday’s Prime Minister’s Question Time threw up yet more examples of David Cameron’s tendency to say stuff that just isn’t true.

Royal Mail

I have previously written about what each of the main parties said about Royal Mail in their manifestos for the last election. Not only was David Cameron wrong to claim that Labour said in their 2010 manifesto that they would privatise Royal Mail, it wasn’t in the Tory manifesto either! The Lib Dems did say they would sell a 49% stake in Royal Mail – but instead a majority stake has been sold and the other safeguards they mentioned were not delivered either. There was no mention of “mates rates” – certain investors being given privileged access to shares – or selling the shares at £1.4 billion below their value.

Health

David Cameron has repeatedly used the NHS in Wales as a political punch bag, despite the fact that it is the UK Government which has slashed the Welsh budget by £1.7 billion. Despite these cuts (which have been exacerbated by the deficiencies in the Barnett formula which looks at population only and not need), Wales continues to spend more per person on the NHS than England. The Welsh Government needs to look at the whole picture, so although it has prioritised health spending it has also done things such as Jobs Growth Wales, which by creating 11,000 good jobs for young people has contributed to unemployment (and specifically youth unemployment) being lower in Wales than any other part of the UK.

At last weekend’s Welsh Labour Conference, it was good to hear our leading politicians making the case for what the Welsh Government is doing – and to be reminded of the dreadful state the NHS in Wales was in last time the Tories were in charge. You can read Ed Miliband’s speech here and Carwyn’s speech here. There was no complacency about the health service, education or anything else – there was recognition that there are significant challenges which need to be addressed.

My family’s experience of the NHS in North Wales has been very positive. There are staff shortages, which suggests to me that we should be doing more to get young people to pursue a career in health and I would like to see us doing more to train people here in North Wales (which would also help with ensuring we have enough qualified health professionals who can speak Welsh, thereby enabling people to receive services in Welsh if that is what they want). But I don’t think constant attacks on health professionals can be good for morale. I can’t imagine that the Tories declaring war on Wales will help David Jones and Guto Bebb keep their seats. It seems that David Cameron has given up on them and is parading a Welsh bogeyman to scare English voters into sticking with him.

Most of us are worse off as a result of this Government – they admitted it in the budget

Today’s PMQs was bad-tempered as usual. I am often struck though at David Cameron’s willingness to say stuff that he must know isn’t true. Alongside the budget, the Treasury published a distributional analysis showing the impact on families not just of this budget but of the various changes introduced since 2010. You can download the full document here.

The following chart shows the Government’s own modelling of what they think the cumulative impact of their changes will be by 2015:

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The chart shows every single section of society will be worse off as a result of this government’s changes, with an average “hit” of £757 per year. Moreover, although it is true that those at the top of the tree are bearing the largest burden, the next most significant “hit” is for those on the lowest incomes. Yes the changes in tax are positive, but these changes are more than wiped out by the changes to tax credits and benefits. The changes in public service spending have a massive impact on the poorest families.

And remember these changes are only the ones that the Government is intending to cause – they don’t take account of the fall in real wages which has occurred over recent years. Labour’s claim that wages have fallen by an average of £1,600 in real terms is backed up by the Institute for Fiscal Studies, who anticipate further falls in wages over the next couple of years and that the poor will again be hit harder than the better off.

The truth is that the Government’s welfare reforms hit working families harder than those out of work. As I am sure the Labour team will be emphasising in today’s debate, cutting welfare spending would be a good thing – but the way to do that is to get people back into work. It is this Government’s failure to tackle low wages, the impact of cutting public spending too far and too fast and the fact that house-building (particularly social rented housing) has fallen of a cliff that are the reasons for welfare spending going up. The Government is set to spend £13 billion more on welfare over this Parliament than George Osborne originally planned.

The bedroom tax is so badly thought out it will probably end up costing more rather than saving money – as well as causing huge misery for those affected. The single most important change to the welfare system in my view is the Compulsory Jobs Guarantee proposed by Ed Milliband, to get young people and the long-term unemployed to work. Everyone has something to contribute and I want to see a society which helps everyone to do so. It is in their personal interests and it is in our collective interest to do so.

A small number of good choices is much better than an infinite choice of bad options

The Government’s decision to “liberalise” pensions is in serious danger of removing choice rather than enhancing it. Why?

This article from the New York Times helps to explain the problem. Given a choice between a “defined benefit” pension scheme and a defined contribution scheme most of us would prefer the former. But the decision to buy an annuity is complex and scary and involves making a gamble. We feel we are likely to be ripped off (and often we are). Psychologically we’re not happy with the idea of deciding how long we are likely to live. So we make bad choices.

As John McTernan has pointed out, pensions are a collective solution that works. It is in all our interests that everyone has a pension so that they can afford to live as long as they live. Apparently the pensions minister is happy for people to use their pension pot to buy a Lamborghini because the worst case scenario is that they will end up having to live on a state pension. But actually this ignores the huge concerns over the rising cost of care. As Andrew Dilnot, Chair of the Government’s Commission on Funding of Care and Support said in launching the Commission’s report:

The issue of funding for adult social care has been ignored for too long. We should be celebrating the fact we are living longer and that younger people with disabilities are leading more independent lives than ever before. But instead we talk about the ‘burden of ageing’ and individuals are living in fear, worrying about meeting their care costs.

The current system is confusing, unfair and unsustainable. People can’t protect themselves against the risk of very high care costs and risk losing all their assets, including their house. This problem will only get worse if left as it is, with the most vulnerable in our society being the ones to suffer.

As well as the problem for individuals, the cost to Government of supporting people whose savings have run out is considerable. So although there is a windfall to the Treasury of moving away from annuities (take your lump sum now, and the tax on it gets paid now too), this is only bringing forward future income rather than creating new income – and in the long term these changes will cost welfare budgets more too. Government does have a financial interest in ensuring that people are able to provide for their old age in a way which means that they don’t have to fall back on the state as well as being in a position to ensure we are all able to exercise meaningful choices right to the end. As the Institute of Fiscal Studies has pointed out, these changes are likely to destroy the market in annuities – so that option will no longer make sense.

There is a win-win alternative: instead of abolishing the requirement to buy an annuity because the annuity market doesn’t work very well, why not offer a fall-back option for people of a government-backed annuity? Require pension providers to inform their clients of the government option: a statement along the lines of “stick with us and you can have £1,000 a month or transfer to the Government scheme and you can receive £1,200 a month” would put an onus on providers to sharpen their pencils or lose business. Of course other options may make sense for some people (paying off debt will always make sense). But the starting point should be for anyone wanting to explore other options to take independent financial advice with very clear recommendations recorded and retaining the tax benefits should depend on this advice being followed – and that the solution provides a long-term income stream.

A Not Very British Institution

FT

This article by Matthew Engel is interesting. But his conclusion that centralisation would be worse doesn’t mean we should keep commissioners. What we should replace them with is a system which requires local consensus on priorities, appointments and dismissals. Being high profile was never the success criteria for police authorities, but ensuring high quality members, held to account by their local authorities would be hugely more democratic than the system that we now have.

It should be no surprise that very few members of the public have asked public questions of their Police Commissioners, as reported by the BBC here. As I wrote while still in office as Chief Executive of the North Wales Police Authority, there are steps that can be taken by a Commissioner who wants to be accountable and who wants to build a local consensus on what is needed. I am sure that a few of them are doing their best in this regard. But the system as set out in law does not require this. Whereas the previous system required regular progress reports on a whole range of issues and the vast majority of them were published and considered in public by members who were expected to have put the time into reading them, the new system is designed to achieve the opposite – to give a single individual the authority to push through their personal agenda without needing to justify themselves to anyone (they can over-rule the Panel even if all members of the Panel disagree). Scrutiny of the Force is a matter for the Commissioner – so if the Commissioner wants to scrutinise in private rather than in public, that is their choice.

As recent events in Ukraine have highlighted, democracy as “one person gets elected and then does whatever they want” is inherently unstable. It may well appear to work well if the individual is intelligent, benevolent, honest and wants to listen to other opinions, then again, a committee system or parliamentary system can work really well when led by such a person too. Where those attributes are missing or there are really difficult decisions to be made which require a consensus rather than simply a choice to be made, systems which “hear all the voices” are much better.

The current commissioners will serve until May 2016. It is important that a better system then takes over.

The Co-operative Movement should have a voice in politics

This article also appears on LabourList

Had it not been for this article in the Guardian I don’t know whether we would have bothered to complete a questionnaire from the Co-op despite receiving a letter about it this week. We are longstanding members of the Co-op and of the Co-op Party. Our local store is fairly small so we don’t do all our shopping there, but we like the ethical stance and we use the group for a range of other services as well. Yes we were concerned at the media coverage of the problems at the Co-op Bank but those problems clearly weren’t as serious as for many other banks and we are satisfied that action is being taken to address the problems and to improve the governance – without moving away from the ethical stance which has kept us with them. The reason for not necessarily prioritising a questionnaire is that we are generally happy for the Co-op Group to continue – and for the Co-op Party to continue as part of the wider movement and therefore might not have prioritised the time to fill in the questionnaire.

According to the Guardian, Euan Sutherland (Chief Executive of the Co-op Group) says “the Co-operative has lost touch with its customers and members and with the communities in which it operates – we haven’t been listening.” Fair enough, I agree there is a problem – but with this type of survey, the way that you ask the question has a significant bearing on the response.

The general public don’t have a high opinion of politics or of political parties. So if you ask “To what extent do you think it is appropriate or inappropriate for big businesses to donate money to political parties?” and whether politics is more or less important than local community, I think we can guess what most people would answer.

The perception is that people involved in politics are mostly in it for themselves and/or spend far too much time listening to wealthy donors and that building a brighter future is all but impossible. We can speculate as to the events which have brought us to this sorry state of affairs, but for me it is more important to think about how we change it. The last thing we need to do to renew faith in politics is for anyone with principles to withdraw. Politics isn’t a spectator sport – despite that being how it is usually depicted on TV. Whether our rugby or football team wins or loses may determine whether we are happy or sad, but who wins in politics makes a real difference to people’s lives. Often it makes the most difference to those who pay it little heed – those who are struggling to provide for their families and for whom the minimum wage, tax credits and affordable childcare made a big difference.

I am proud to be a member of the Co-op Party and what it stands for – that people will achieve more by working together than they can by working alone. The manifesto at the last General Election made a lot of sense in terms of the long term solutions needed to improve our economy and restore faith in public services. It is undoubtedly a positive influence on its sister party, the Labour Party which has sometimes been rather too keen on imposing statist solutions rather than co-operative or mutual solutions (i.e. doing things to people instead of involving the people affected in designing the solution for themselves). Ed Miliband himself highlighted the importance of co-operative values before he was elected Leader of the Labour Party and last week wrote about people-centred public services.

There is a deeper contribution made by the Co-operative Party – which is to provide a link between the broader co-operative movement and politics. So no I don’t particularly want “big business” to be involved in politics – but I do want to see far more involvement from membership organisations, whether that is in terms of direct support for political candidates or more generally engaging in a debate about how improve our local communities, Wales or the United Kingdom. Could the Co-op movement engage more effectively with its members and supporters and help get them more involved in community initiatives? Yes undoubtedly and politics should be seen as part of that. The Co-operative Party itself needs to change and to get far more people involved – with fewer committees and more opportunity for real engagement. That is a huge but important task which the new General Secretary, Karin Christiansen, has already started working on. I hope the wider Co-operative movement will support her in this, rather than pulling the rug from beneath her.

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